By: Joey Casolaro CFP®
Each of us has two powerful assets we can cultivate throughout our lives: human and investment capital. These twin engines of wealth can propel us toward greater prosperity and financial independence.
In our working years, we primarily rely on our human capital - the skills, knowledge, and abilities that allow us to earn an income through employment or entrepreneurship. This human capital is the fuel that drives us forward, helping us build savings, investments, and, ultimately, wealth.
However, there comes a point when our human capital can transition to more of a supporting role. With disciplined saving and strategic investing over time, our investment capital has the potential to grow so substantially that it can generate enough income and returns to sustain us financially. When our investment capital reaches this critical mass, we achieve financial independence - the goal many strive for.
Below are three strategies you can implement today to increase your human capital.
Increasing Your Human Capital
1. Networking and Relationship Building
The people you know and the relationships you cultivate can be invaluable for your career growth and personal development. Identify potential mentors at your place of work, typically senior management, with whom you can develop a relationship. Attend industry vents, join professional associations, and actively build connections. A strong network opens doors to new opportunities, mentors, collaborations, and the sharing of expertise.
For people who work from home, this is huge. Earlier this year, The Wall Street Journal reported people working from home got promoted 31% less frequently in the past year than office-based workers. It is challenging to build a connection with your team and managers over a computer, making it critical you go into the office at least a couple of days a week or set up one-on-one meetings outside of work.
2. Personal Skill Development
Continuously investing in learning new skills and honing existing ones is crucial in today's ever-evolving job market. Pursue training courses, obtain certifications, read extensively in your field, and push yourself to take on stretch assignments at work. The more versatile and highly skilled you become, the greater your human capital.
One of the most important skills anyone is communicating clearly and effectively. One way to increase this skill is by joining public speaking organizations like Toastmasters, where you can practice public speaking and hone your leadership skills.
3. Embracing Leadership Opportunities
Leadership roles, whether formal or informal, provide immense growth opportunities. Take the initiative to lead projects, mentor others, or get involved in committees or volunteer work. Developing strong leadership abilities enhances your value, expands your influence, and signals your potential for greater responsibilities.
By implementing the above strategies, you will become more valuable to your company, allowing you to request a pay increase. With these additional funds, you should focus on increasing your investment capital using the three strategies below.
Increasing Your Investment Capital
1. Strategic Savings and Budgeting
The foundation of growing your investment capital is smart saving habits. Create a realistic budget, allowing you to live within your means while setting aside funds for investment. Automating savings and practicing disciplined spending is critical to amassing the capital needed for future investments. Pay yourself first.
2. Investing in a Diversified Portfolio
Once you have savings set aside, putting that capital to work through investing is essential. Diversify your investments across different asset classes, such as stocks, bonds, real estate, and alternative investments. This diversification helps mitigate risk and provides exposure to various growth opportunities.
3. Seeking Financial Education and Guidance
Investing can be complex, and gaining a solid understanding of financial concepts and strategies is crucial. Read books, take courses, attend seminars, and consider working with a qualified financial advisor. The more you educate yourself, the better equipped you'll be to make informed investment decisions and navigate financial markets effectively.
By actively pursuing human and investment capital growth, you can position yourself for long-term success, increased earning potential, and a secure financial future.
Joey Casolaro is a CERTIFIED FINANCIAL PLANNER™ at HIGHLAND Financial Advisors, a Fee-Only fiduciary wealth advisory firm that offers comprehensive financial planning, retirement planning, and investment management. Joey graduated from the University of South Florida with a bachelor’s degree in personal finance and successfully passed the CFP national exam in 2021. Joey enjoys working out, spending time outdoors, and hanging out with family and friends in his free time.